The American rental firm Vrbo (taken over by HomeAway.com) is an online rental agent (similar to AirBnB). As they are US based they are required to identify foreign owners and withhold the appropriate tax if a US tax identification number has not been provided to them.
When you own US rental property, you are required to file Federal tax returns each year for the income earned (on Form 1040NR). Depending on the state the property is based in, you may also have to file a State tax return as well.
Vrbo is asking for an ITIN - why?
Vrbo are required to identify all foreign owners and report any rental income received by them to the IRS.
They do this by asking you to provide a tax identification number. As a non resident you will not have a Social Security Number and will therefore need to provide an ITIN (individual tax identification number) to them.
How do I apply for an ITIN from outside the USA?
You will need to submit Form W-7 to the IRS with the appropriate documentation to apply for the number. Just Breve is a UK based certifying acceptance agent (CAA) who can assist with ITIN applications for all applicants based in the United Kingdom (including Scotland, Ireland and Wales).
As a CAA, Just Breve is able to complete all paperwork and certify your passport or other identity documents for the application. Currently due to Covid delays, the ITIN will be issued within 2 to 4 months depending on processing volumes at the ITIN unit.
Do I need to file a 1040NR US tax return?
If you have US rental income - yes you will need to file every year you rent out your US property. As well as possibly filing a state return, depending on where the property is located.
Most foreign owners do not owe tax due to the ability to take depreciation as a cost each year as well as a multitude of other deductions. You do however have to timely file each year to be eligible to claim these deductions (else the IRS will tax you on the gross income).
Once I receive my ITIN do I just give this to Vrbo?
Yes - just advise them of the number via your online account. Each year, they will then issue Form 1042-S annually to you showing the gross income paid out in the calendar year.
If no ITIN is provided, they will withhold 30% of the gross income and pay this to the IRS and you will need to file a 1040NR tax return to claim it back.
More details can be found here - Vrbo - US taxes withheld on payouts
If you need help or assistance on applying for an ITIN please contact Just Breve today for more information:
Tel: 0208 1444632